Mr Adewale Oyerinde is the Director-General of the Nigeria Employers’ Consultative Association. Speaking on the issues facing the economy and the way forward.
There seems to be high rate of casual workers in almost all sectors of the economy. What is your group doing to end this phenomenon?
One of the fundamental things to note is that labour is not a commodity and every worker deserves to be treated with dignity and made to work in an environment that is humane and decent. As a responsible member of the International Labour Organization, we have at several forums affirmed the rights of workers and employers and the need to protect same by all stakeholders, including the government.
On the issue of casual workers, it is not totally true that the rate of casual workers is high in almost all sectors. What we preach is responsible enterprise, which our members have been faithful to. While we have incidences of casual workers in some industries and sectors, these incidents are predominantly circumstantial and at times, seasonal. It is circumstantial because of the environment in which businesses are made to operate. For a business to thrive or survive, it must meet its operating cost and make profit to meet the aspirations of shareholders. However, like in all climes, when it becomes difficult for a business to survive, it will naturally and unfortunately find ways to cut cost. Rather than disengage staff and increase the rate of unemployment in the country with its social and economic consequences, some businesses evolve into other models of employment like outsourcing, contract for or of service and in an extreme situation, casualisation. But in view of regulating and/or eradicating this practice, we are working with the Ministry of Labour and Employment and other social partners to solve the challenges arising from this practice. We cannot treat the issue of casualisation in isolation of the whole macro-economic issues that we are presently trying to address. We will continue to engage employers and all stakeholders to enable us enhance our capacity to create a favourable environment for employers to be competitive and create more decent job opportunities.
You said something about the government’s fiscal policies stifling the productive sector. Can you throw more light on that?
In simple terms, fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policies to promote strong and sustainable growth and reduce poverty. Fiscal policy is, in fact, a two-edged sword. It can promote sustainable growth but at the same time, if not growth-focused, can stunt growth and deepen poverty.
In our instance, following two recessions, coupled with the disruptions that COVID-19 brought, it was expected that the the government will do all that is possible to ensure enterprises rebound from the shocks associated with these events. While other global challenges like the Russia and Ukraine war affected government’s revenue, we did not expect the government to respond to its lean revenue challenge by increasing taxes and levies or introducing new ones. Instituting expansionary fiscal policy thrusts like tax cuts and increased government spending (not necessarily incurring more debts) would have served the economy better. Our seeming lack of effective fiscal rules means that the unpredictability of income from oil and gas resources and our uncontrollable subsidy expenditure continue to disrupt national and local budgets.
At the last count, there are over 50 different types of taxes, levies and dues paid by enterprises at the federal, state and local government areas and over 10 statutory deductions across all sectors. While businesses are struggling to survive and, in fact, many have either closed down, reduced capacity utilisation or relocated to other climes, businesses are still grappling with the payment of many other taxes, including Company Income Tax, stamp duties, petroleum profit tax, capital gains tax, Value Added Tax, education tax and the newly introduced National Youth Service Corps Levy, telecommunication excise tax, excise tax on carbonated drinks, among many others.
In nations with closely similar context and history, tax incentives were offered to organised businesses to boost investment. Indonesia granted an exemption from import taxes for manufacturing companies and provided a 30 per cent discount on Corporate Income Taxes. Malaysia implemented accelerated capital allowances for machinery and equipment, a tax deduction of up to RM300,000 (about $74,257) for renovation and refurbishment costs, and import duty and sales tax exemptions for machinery and equipment used in port operations. New Zealand introduced accelerated depreciation deductions for commercial and industrial buildings, including hotels and motels. The focus of these tax relief measures has been to improve business liquidity during the difficult times. Also implemented was VAT reductions. This was aimed at promoting consumption and limit from its collapse. If these countries can implement these, Nigeria should be able to do more.
You also said that the monetary policies are intended to reflate the economy through several interventions. Can you explain further on this?
Over the past few years, the Central Bank of Nigeria has initiated monetary policies aimed at stimulating the economy towards the path of sustained growth. These initiatives include but not limited to exclusion and prohibition of about 47 items from eligibility to access forex on 23rd June 2015; Naira4Dollar Scheme aimed at boosting Diaspora remittances; ban of FX sale to Bureau De Change operators and e-Form ‘A” for Forex Online introduced in July, 2021. In October 2021, the e-Naira and Pan African Payment and Settlement System were launched; RT200 Programme was launched in February 2022, with the aim of extending the Naira4Dollar scheme from the IMTOs to the IEFX window. Also, CBN is to pay N65 for every $1 repatriated and sold at the I&E window, among many others. Our concern, however, is that notwithstanding these laudable monetary policy interventions, many of these have not yielded desirable outcomes in increasing the flow of FX, reflating the economy or promoting enterprise competitiveness.
The policies have not worked either because of inherent inconsistencies in the policies, lack of critical stakeholder involvement in their formulation and implementation or subtle and systemic sabotage. While there could be many other reasons unknown, deepening engagement with the Organised Private Sector of Nigeria in the formulation and implementation of these policies will definitely enhance its success rate.
Nigeria’s debt stands at over N40trn. The question on the lips of many is, when will Nigeria stop borrowing?
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Economic analysts, including global financial institutions like the World Bank and IMF, had raised concerns about the dangers inherent in the growing debt bill, vis-à-vis declining revenue. This is more worrisome when we consider the future of the country’s very youthful population that is in need of major boosts in economic activities through fiscal interventions to stimulate education, health, infrastructure, among others, as against putting such expenditure into the service of debt that is perceived to be largely misapplied.
It is no secret that the nation has a triple-edged challenge of revenue shortage, spending problem and unsustainable debt accumulation. From the revenue side and according to tax experts, no nation has become prosperous by over-taxing its people. The tax system, in fact, tends to punish the poor. A way to reduce your debt burden is to focus on improving revenue. We have placed greater emphasis on forex from crude to the detriment of other sectors. While efforts are being made to deliberately diversify the sources of forex through the many initiatives of the Central Bank of Nigeria and the focus on backward integration, import substitution, promotion of agriculture through Anchor Borrowers’ Scheme and many others, we have left it too late. We allowed ourselves to be consistently caught in the web of the vagaries of global oil price volatility.
Recently the Debt Management Office reported that the total public debt was N39.5 trillion as of December 2021. About 11.3 per cent of this debt is owed by the states and the FCT. When we factor in borrowings from CBN and the stock of Assets Management Corporation of Nigerian, the debt profile will be in excess of N50 trillion. In the schedule of local borrowing recently released by the Debt Management Office, it showed that public debt would soon exceed N50 trillion, rising from the N39.55 trillion recorded in 2021. The DMO’s FGN Bonds Issuance Calendar for Q2 of 2022 indicated that N720 billion would be borrowed in the quarter. Data on the Federal Government’s fiscal actions confirmed that public debt might increase by N11.8 trillion to bring the year-end figure to a little above N51 trillion. While we are yet to be in a debt crisis, we are, however, not far from it. You get into a debt crisis when the only option of meeting your local and international obligation is to borrow and the cost of servicing the debt becomes greater than your revenue. Our debt issue is more worrisome because in the first four months of the year, the government used close to the entire revenue to service debt. The debt service cost to revenue ratio was about 119 per cent. It is important that we realign our priorities and devise ways to reduce wastage and institutional corruption so that we don’t get to a point where we use the whole revenue to service debt.
The implication of this serious situation is the potential of an imminent debt trap in which the country will neither be able to meet its debt service obligations nor will it be able to meet its obligation to its over 200 million population through funding of its capital and recurrent expenditure. Naturally, this comes with numerous other socio-economic consequences impacting on some of the key Sustainable Development Goals such as poverty, hunger, health, education, as well as issues of social unrest and crime.
Nigeria must manage its debt burden to avoid further pressure on revenue. The Association has consistently advised the government to borrow from cheaper sources (if it becomes impossible not to borrow) and consider deficit financing from equity instead of expensive borrowings used for recurrent expenditures.
It is also important for the government to take a critical look at the subsidy regime, which has become a major leakage in the national purse. With over N5trn to be expended as subsidy cost in 2022, this is not sustainable. Genuine efforts should be made to fix the four national refineries and encourage private individuals like Aliko Dangote to invest in the sector.
We, however, wish to sound a note of caution. While efforts to raise revenue is laudable and commendable, doing so through increasing tax and levies or introduction of new ones will be counter-productive and the nation will be sabotaging itself.
How do you think the government can solve the issue of ASUU strike, looking at the fact that we are experiencing brain drain and so many youths leaving the country?
For the umpteenth time in as many years, the Nigerian universities and indeed educational system witnessed another crisis with the ASUU strike that has lasted for over five months. The Nigeria Labour Congress, in solidarity with ASUU, called for a national rally that was held from 26th – 27th July, 2022. While the action of the NLC did a lot to compel government to give more attention to the protracted negotiation between ASUU and government, the reality remains that beyond the resumed negotiation or finalisation of agreement, the fundamentals of our educational system and its contribution to national development must be reappraised.
We believe that it is time for us to stop the grandstanding and allow national interest to prevail. We cannot continue to compromise and sabotage the future of the country for whatever reason. Government must accept responsibility for the chaos that has bedeviled the educational system for many years and has made public universities unattractive for our youths. The technicalities and logic of the negotiation have not helped and will not help the nation. We call on the government to honour its obligations to the Nigeria education system and not only ASUU and other unions in the sector. This is also a good opportunity for all stakeholders to sit down and address the industrial relations system in the educational sector.
While many might say that youths leaving the shores of the country is a good trend as they will join the number of those that will send remittances back to the country in the future, we, however cannot close our eyes to the fact of the pressure on forex caused by demand for it by those wishing to school outside the shores of Nigeria.
We urge all parties to urgently finalise negotiations to enable the youth return to school and save the nation the current embarrassment.
